A meeting of the Joint Technical Committee (JTC) of the OPEC and non-OPEC oil producers part of the supply-cut pact found on Thursday that oil inventories in developed economies had dropped to just 12 million barrels over the official target of the cuts—the five-year average, a source familiar with the matter told Reuters.
The technical panel is meeting in Jeddah, Saudi Arabia, ahead of a ministerial meeting on Friday, which will be attended by the energy ministers of Saudi Arabia and Russia, among others.
According to Reuters’ sources, the panel found today that oil inventories in OECD nations were 12 million barrels above the five-year average, a virtually non-existent surplus, especially if compared to the 340-million-barrel overhang that was present in January 2017, when OPEC and its non-OPEC partners led by Russia started to purposefully cut oil production in an attempt to erase the glut and prop up oil prices.
Thanks to the cuts, and to a better-than-initially expected global oil demand growth last year, OPEC and friends have now managed to virtually bring the oil market back to balance, if the five-year average of OECD oil stocks is the metric to measure the success.
Yet, there are no signs that OPEC and the non-OPEC partners would be discussing exiting the cuts. Rather, they are said to be ready to discuss ‘moving the goalposts’ on the deal by changing the five-year average to a seven—or more—year average, and those proposals would shift the inventory goal further out in time.
According to the sources who spoke to Reuters today, the ministers will discuss the five-year average metric on Friday, although the panel did not make recommendations on this issue today.
Instead of winding down the cuts now that the oil glut is virtually eliminated, some OPEC members and its allies are said to be looking to change the metric to justify prolonging the cuts until the end of 2018 in hopes of overtightening the market and pushing for even higher oil prices. OPEC’s de facto leader and largest producer, Saudi Arabia, would reportedly be happy to see oil prices rising to as much as $100 a barrel to fill up government coffers and boost the valuation of Aramco.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.